General Principals - Conduct and Regulation - 8% - 14 of 170 questions

Question 1

Code of Ethics (6)

Answer 1

HID Conflicts Confidentially Positively

1. Act with Honesty, integrity and diligence
2. Act in client’s best interests
3. Excercise due care
4. Avoid or disclose and manage conflicts of interest
5. Maintain confidentiality/protect client privacy
6. Act in manner that reflects positively on Financial Planning profession/CFP

Question 2

Define Financial Planning

Answer 2

Financial Planning is a collaborative process that helps maximize a client’s potential for meeting their goals through financial advice that integrates relevant elements of the client’s personal and financial circumstances.

Question 3

Define Financial Advising

Question 4

What is the 7 step Financial Planning Process?

Answer 4

1. Understand client’s personal and financial circumstances
   2. Identify and select/prioritize goals
   3. Analyze current course of action and potential alternative courses of action
   4. Develop financial planning recommendations - things to consider
   § assumptions and estimates
   § basis for making the recommendation
   § timing and priority of the recommendation
   § whether recommendation is independent or must be implemented with another recommendation
   5. Present financial planning recommendations
   § discuss what info was considered in developing the recommendation
   6. Implementing financial planning recommendations (unless specifically excluded from scope of engagement)
   § cfp must establish who is responsible for implementation
   □ cfp pro, client, 3rd party responsibilities
   □ if responsible, cfp must identify, recommend and help client select and implement actions, products and services that put plan into motion
   □ cfp considers basis, how it’s designed and advantages and disadvantages of recommendation
   7. Monitor progress and updating (unless specifically excluded from scope of engagement)
   § establish responsibilities with client
   § if responsible for monitoring, cfp responsible for monitoring client’s progress towards meeting their goals
   § work with client to obtain current info of personal and financial circumstances
   □ changes necessary?
   ® update as appropriate
   § act prudently to document
   □ significance of info
   □ the need to preserve info in writing
   □ the obligation to act in client’s best interests
   □ cfp and firm’s policies and procedures

Question 5

What are the 3 circumstances where a CFP professional is required t to provide Financial Planning?

Answer 5

1. Agreement to provide financial planning
2. Client has reasonable basis to believe that CFP will provide or has provided financial planning.
3. CFP provides financial advice that requires integration of relevant elements of client’s personal and financial circumstances in order to act in client’s best interest

Question 6

What are the 5 factors, aka integration factors, that require a cfp who is providing financial advice to provide financial planning?

Answer 6

1. Number of relevant elements of client’s personal/financial circumstances that the financial advice may affect
   2. The portion of assets that will be affected
   3. Length of time assets may be affected
   4. Overall exposure to risk
   5. Barrier to modifying the actions taken
   - cfp required to provide financial planning but the client doesn’t agree to engage the cfp for financial planning
   □ not enter into engagement
   □ limit scope of engagement
   □ inform client of how financial planning would benefit client, and how not engaging with cfp may limit cfp’s financial advice
   □ terminate engagement

Question 7

What are 3 Fiduciary Duties

Answer 7

○ Duty of Care
○ Duty of Loyalty
Duty to follow client instructions

Question 8

What information must be provided in writing for Financial Advice?

Answer 8

privacy policy

Question 9

What information must be provided in writing for Financial Planning?

Answer 9

○ Everything except conflict of interests which can be communicated orally or in writing

Question 10

If a CFP pro has a sincere belief that they are acting in the client’s best interest but failed to make full disclosure of conflict of interest, is that sufficient?

Answer 10

NO - they must make full disclosure

Question 11

What is included in sales-related compensation?

Answer 11

○ 12b-1 fees
○ commission
○ revenue sharing

Question 12

What is NOT included as sales-related compensation?

Answer 12

○ soft dollars
○ reasonable and customary fees
non-monetary benefits

Question 13

What must a cfp do before recommending another professional’s services? (3 requirements)

Answer 13

○ reasonable basis for recommendation
○ disclose compensation for recommendation
○ take care to protect client’s interests

Question 14

Standards of Conduct
15 Duties Owed to Clients

Answer 14

1. Fiduciary Duty (3)

        2. Integrity
   		
        3. Competence
   
        4. Diligence
   		
        5. Disclose and Manage Conflicts of Interest 
        6. Sound/objective professional judgement
   			
        7. professionalism
   			
        8. comply with law
        9. confidentiality and privacy
   		
        10. Provide info to a client - when providing financial advice or financial planning
        11. duties when communicating with a client
   			
        12. duties when representing compensation
   		
        13. duties when recommending, engaging or working with additional persons
   			
        14. duties when selecting/using/recommending technology
   	
        15. refrain from borrowing or lending money UNLESS